Morningstar | Ritchie Brothers Reports July Auction Gross Transaction Value Improved From the Prior-Year Period
Ritchie Bros. improved July auction gross transaction value 12%, from $249 million to $279 million, in the second month of lapping monthly values that include IronPlanet results. June gross transaction value grew 4% year over year, and buyers increased year over year after declining in May and June.Following second-quarter earnings, we increased our fair value estimate to $30 from $27 (to CAD 39 from CAD 35) because of the time value of money and our increased expectations of customer acquisitions over the next two years. Second-quarter revenue grew 22% from the prior-year period to $309 million. Strong live auctions in the U.S. coupled with the complete integration of IronPlanet and record quarterly online sales buoyed the top line. Multichannel offerings will be important in the upcoming years as management attempts to leverage its network effect in the auction space and attach ancillary options to entrench itself as the primary provider for customers.
Operating income excluding acquisition costs increased 27% to $64 million and margins expanded 80 basis points to 21%. Equipment mix and prudent cost-saving measures aided margin expansion. However, the number of buyers, bidder registrations, and consignments continues to be constrained and decreased year over year. We believe unfavorable operating conditions and high equipment utilization rates in the marketplace will continue near term, and we reiterate our negative moat trend as intense competition from equipment dealers will likely continue.
Adjusted EPS grew 27% year over year to $0.42, and first-half cash from operations minus capital expenditures was a healthy $90 million. During the quarter, the company repaid $27 million in debt and increased its dividend by 6%. We believe management will use remaining funds to build the Canadian online platform. We also expect the company to establish additional relationships with equipment manufacturers and dealer networks, similar to its alliance with Caterpillar.
Ritchie Bros. Auctioneers sells industrial equipment and other assets for the construction, agricultural, transportation, energy, mining, forestry, material handling, marine and real estate industries at its unreserved auctions and online marketplaces. The auction items are sold during live on site auctions without a minimum or reserve price. Through EquipmentOne (Co.'s online marketplace), equipment sellers are able to list their equipment on the online marketplace, receive and accept offers, and complete and settle their sale. Co.'s other services include Private Treaty, in which Co. acts as a private sales agent and conduct negotiated sales of equipment items between buyers and sellers.
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